Investors were awaiting the final gross domestic product (GDP) estimate for the second quarter and weekly jobless claims data – which were published at 8:30 a.m. ET - to assess the strength of the U.S. economy. Us weekly jobless claims came in slightly below expectations at 204,000 last week, while the consensus was 214,500. The real GDP rose at an annual rate of 2.1% in the second quarter, in line with the previous estimate and the market expectation.

A procedural vote by the Senate on Thursday to avoid a partial government shutdown is also closely watched. But the main focus of investors is a speech by Powell at 4 p.m. ET, as well as remarks by voting members Chicago Fed President Austan Goolsbee and Board Governor Lisa Cook.

It's clear that investors are less and less at ease with the interaction between interest rates and economic trends. The dollar's strength and oil's rise towards USD 100 a barrel are undermining the impact of rising rates on inflation. At least, that's the feeling that's taking hold, and it's reflected in the continuing rise in the yield on US 10-year debt. Yesterday, it stood at 4.60%. Given that it had already reached a 16-year peak the previous day, the records continue to fall - no need to draw you a picture. For the time being, financiers have not changed their bets that the Fed has already reached its rate peak. The CME's FedWatch tool, the best for showing what the market is actually thinking, hasn't changed much lately to the renewed tension. Things could change in the weeks ahead, if inflation data is less favorable than expected and the US economy shows (too) few signs of slowing down.

In this respect, the PCE inflation figures published tomorrow afternoon in the United States will be a good first test, even if the statistics cover August rather than September. So, tomorrow's last trading session of September promises to be a good one, at least if it addresses the issues that are currently troubling the market. Finally, I learn from Bloomberg that volatility could be heightened by the unwinding of a large options position held by a JPMorgan Chase equity fund (specifically the JPMorgan Hedged Equity Fund, $16 billion in assets), since, and I quote Bloomberg, "tens of thousands of put protection contracts held by the fund will expire Friday at a strike price not far below the current level of the S&P 500". I haven't had time to dig into this info, particularly to understand why these products are expiring so late in the month, so I'll put it down here.

How are equity markets faring in this context? They lost quite a bit of ground in September and are stagnating a little this week. Yesterday, Wall Street hovered around equilibrium: in the green for the S&P500 but in the red for the Dow Jones.

Well, the context is sufficiently tense to explore a few alternative strategies based on market movements that look sustainable. Take the dollar, for example. One of the most crowded bets at the beginning of the year was: go bearish on the greenback. Obviously, with the Fed taking big swings at the market's certainty of rate cuts, the dollar ended up showing its little muscles to everyone, climbing back up to USD 1.05 for 1 EUR last night, for example.

Competent people believe it will continue to do so. BofA's forex strategists, for example. They "see a golden cross signal for the DXY in Q4 2023". In other word, they believe that the dollar index, or DXY, an index that measures the greenback's evolution against a basket of six currencies, should rise. Over the past 25 years, this type of pattern has risen 14 times out of 16 over the following 40 to 45 days. 

And which European assets are doing well in a rising dollar? In a nutshell: low-risk equities, energy and Norway. Let's see why.

Among the stocks that correlate well with a strong dollar and are well exposed to the US market (in other words, those that generate a lot of sales in USD), we naturally find quite a few players in healthcare (Roche, AstraZeneca, Swedish Orphan...) and energy (BP Plc, Shell...), as well as food and beverages (Reckitt, Nestlé, Danone...). The two top-ranked companies according to BofA's criteria are British American Tobacco and BAE Systems. Tobacco and defense are more in the Sin Stock category. The Norwegian market also tends to perform well, thanks to its large oil contingent (we were talking about that here earlier this week).

As usual, China's markets have a life of their own, rising and falling on rumors of government measures to support the economy (fairly rare) and news of the agony of local real estate groups (more frequent). This morning, it's the latter category again that stands out, with the suspension of China Evergrande's share price for an as yet undetermined reason. This obviously adds fuel to the fire of the Chinese market's current demons. Mainland Chinese markets will close this evening and not reopen for another ten days, due to national festivities.

Today's economic highlights:

Economic confidence in the eurozone, Germany's September CPI, US GDP, new jobless claims and pending home sales are on the agenda. 

The dollar is slightly down to USD 0.9503 and GBP 0.8209. The ounce of gold is trading at USD 1873. Oil resumes its ascent, with North Sea Brent at USD 93.90 a barrel and US light crude WTI at 93.20 USD. The yield on 10-year US debt reaches 4.60%. Bitcoin trades at USD 26,400.

In corporate news:

  • Micron Technology was down 4.9% in premarket trading, as the semiconductor manufacturer forecast a larger net loss in the first quarter of its fiscal year.
  • HP inc gave up 1.5% in premarket trading, as Berkshire Hathaway sold an additional 4.61 million shares of the PC manufacturer, according to a stock exchange notice.
  • Uber advances 2% in after-hours trading following the appointment of Analog Devices defector Prashanth Mahendra-Rajah as CFO.
  • Tesla - The first trial in the United States concerning the Autopilot driver assistance system in the automaker's vehicles, accused of causing a fatal accident in 2019, opens this Thursday in California, and its outcome could influence other similar cases in the rest of the country.
  • Hollywood studios and representatives of striking actors will hold talks on October 2, the first such meeting in months, the two sides announced in a joint statement issued Wednesday evening.
  • Philip Morris International has recruited new lobbyists in at least 19 U.S. states this year and plans to hire in four more over the next two weeks, show public records consulted by Reuters and information provided by the Marlboro cigarette maker.
  • Citigroup - British bank HSBC is in the process of buying Citigroup's China wealth management division, which manages over $3 billion in assets, two sources close to the deal told Reuters.
  • Jefferies Financial Group reported a lower-than-expected third-quarter profit on Wednesday, against a backdrop of continuing economic uncertainty that has slowed M&A activity. The share price fell by 3.6% in pre-market trading.
  • Gamestop appointed Ryan Cohen as CEO on Thursday, giving the activist investor more power to turn around the video game distributor. Shares jump 9.9% in pre-market trading.
  • Adobe was ordered to pay nearly $33.8 million to ViaTech Technologies, a software publisher, for infringing a patent relating to a system for controlling access to digital content, a Delaware federal court jury decided on Wednesday.
  • Peloton Interactive climbs 12.3% in pre-market trading after announcing a five-year partnership with Lululemon Athletica to become the sporting goods retailer's exclusive digital content provider.

Analyst recommendations:

  • 888 holdings: Numis maintains its hold recommendation with a price target reduced from GBX 110 to GBX 100.
  • Anglo american plc: BNP Paribas Exane maintains its neutral recommendation with a price target reduced from GBX 2400 to GBX 2330.
  • Burberry group: Kepler Cheuvreux maintains its hold recommendation with a price target reduced from GBX 2200 to GBX 2100.
  • Ceres power hold: Berenberg maintains its buy recommendation and reduces the target price from GBX 1140 to GBX 1025.
  • Crowdstrike: Daiwa Securities maintains its buy recommendation and raises the target price from USD 194 to USD 199.
  • Cummins inc: Deutsche Bank maintains its hold recommendation with a price target reduced from USD 228 to USD 220.
  • Emerson elec: Deutsche Bank maintains its hold recommendation with a price target raised from USD 97 to USD 106.
  • Enbridge inc: JP Morgan maintains its overweight rating and reduces the target price from CAD 58 to CAD 56.
  • Honeywell int: Deutsche Bank maintains its buy recommendation and reduces the target price from USD 236 to USD 227.
  • Illinois tool wo: Deutsche Bank maintains its sell recommendation and reduces the target price from USD 188 to USD 183.
  • Ingersoll-rand: Deutsche Bank maintains its hold recommendation with a price target raised from USD 64 to USD 70.
  • International di: HSBC maintains its hold recommendation with a price target raised from GBP 2.15 to GBP 2.80.
  • Johnson controls: Deutsche Bank maintains its buy recommendation with a price target reduced from USD 77 to USD 74.
  • Micron tech: JP Morgan maintains its overweight recommendation and raises the target price from USD 75 to USD 80.
  • Mitchells & butl: Peel Hunt maintains its buy recommendation and raises the target price from GBX 250 to GBX 275.
  • Netflix: JP Morgan maintains its overweight recommendation and reduces the target price from USD 505 to USD 455.
  • Nextera energy: BMO Capital Markets maintains its outperform rating and reduces the target price from USD 88 to USD 72.
  • Rockwell automat: Deutsche Bank maintains its hold recommendation with a price target reduced from USD 330 to USD 315.
  • Stanley black &: Deutsche Bank maintains its hold recommendation with a price target reduced from USD 98 to USD 86.
  • Take-two interac: JP Morgan maintains its overweight rating and raises the target price from USD 162 to USD 165.
  • Trane technologi: Deutsche Bank maintains its hold recommendation with a price target raised from USD 212 to USD 221.
  • United parcel-b: Barclays maintains its equalweight recommendation and reduces the target price from USD 180 to USD 175.
  • United rentals: Deutsche Bank maintains its hold recommendation with a price target raised from USD 405 to USD 409.
  • Workday inc-a: Morgan Stanley maintains its overweight/attractive rating and reduces the target price from USD 260 to USD 245.